The bubble will burst soon!
This has been the hope of most of the families living in Greater Vancouver area. With the advent of Foreign Buyers Tax in BC, it was shown last week that there is a slump in the real estate market. It is said that there is a 20% drop in the sales. Though this number gives a lot of hope, I wanted to dig a bit more on this topic.
This is an area wise analysis and reasons why I believe this slump is again not an indication of the bubble burst.
Detached Homes
Observations
- There are more detached homes to buy, but there are fewer buyers opting for it.
- Market was at its peak in Feb 2016
- New West seems to be having a good listed to sold ratio, but a look at REW suggests that the detached homes listed now are predominantly 50-110 years old and they might have been bought for the sole purpose of another residential apartment or townhouse development.
- As of August 20, 2016, there are only 74 detached houses for sale in New West versus 400 detached houses for sale in Burnaby.
- The minimum price of a detached house in Burnaby is close to 1 million.
- Burnaby and Vancouver East seem to have seen a slump, but it is quite common for a detached house to stay in the market for long.
Attached Homes
Observations
- A drastic decrease in number of active listings across the region
- A lesser number of sellers for attached houses and number of buyers for the same.
- This segment of the market has fairly saturated with prices between 800k-900k
Apartments
Observations
- Similar to the attached house segment, this has a significant decrease in the number of active listings.
- The most preferred segment for working class buyer market.
- With a lot of new developments in this region, it seems to a segment which will have more action in coming months.
What does this mean to a common man?
Let us consider an average first time home buyer family which has 2 adults and 1 kid. They would require 2 Bed and 2 baths at the minimum(1.5 baths is still advertised as 2 in most of the listings). The family might want to restrict themselves to a budget of 8000. Also, a minimum of 1000 sq.ft so that they can at least invite one family for a sleepover!
As of Aug 20, 2016, this is the view of the options available for the family.(The listings here are filtered with max of $500,000.)
Restricting them to Burnaby leaves them with 18 properties. Imagine the bidding war that would be happening with this restricted numbers!
Bubble has shifted its segment
Demand versus supply is the prime factor that affects the market. This just means the bubble has moved from detached house segment to the attached and the apartments segment. It just hurts the common working class more now.
Exorbitant rentals
When sales decreases, rentals increase. An average apartment in Burnaby(1 bed + den and 1 bath) would easily cost 1500.
Bidding
This is from my personal experience. The listing price is to be interpreted as starting price. Realtors out there are playing a so-called strategy game and you will never end up buying any property at its listed price. They reduce the price intentionally to increase the demand. Open-ended offers like, 100k more than the highest bid will make it highly difficult to crack the market.
Clearly, there seems to be no 20% slump anywhere for a common man(except for his salary)!
Data Source:
Real Estate Board of Greater Vancouver REW REMAX